Learn From History: The US Stock Sell-off Will End in October?
@Capital_InsightsοΌ
How will prepare for October? Do you believe there will be a positive monthly return? With the FED tightening monetary policy, the U.S. stock market has increased volatility, and investors are concerned about when the market's sell-off will end. And history suggests that October may give investors a chance to breathe a sigh of relief. Several researchers and market experts have pointed to the reasons behind the unusual fall in U.S. stocks that could increase the odds of a late fall bottom. October to be remembered? Three reasons below: (1) Major market lows have a habit to come in October. Jeffrey Hirsch, editor at Stock Traders Almanac, said nine of the 24 bear markets in the Dow since the 1940s ended in October. (2) However, what is NOT IN THE CHART, BUT IS MORE IMPORTANT: most MAJOR market crashes occurred in Oct.=1929, 1987, 2008, etc. (3) Now, 2022--one for history book. chart from:@GameofTrades Specifically, analysts pointed to an above-average sell-off in U.S. stocks in September. Crucially, this sell-off is largely unrelated to fundamentals, so the market could begin to recover in October, when artificial selling pressure subsides. Lawrence Tint, former U.S. CEO of Barclays Global Investors, said, End-of-season reporting and tax savings, two factors that can be particularly powerful in September of a bear market year. The first is when mutual funds sell losing stocks to avoid them appearing in quarter-end reports. The second scenario occurs when shares are sold to realise losses that can be used to offset capital gains that would otherwise be taxable. All mutual funds are required to end their tax year in October, and some fund managers will reap their tax losses in September to avoid selling funds as the tax year draws to a close. In addition, seasonal affective disorder, or SAD, was also one of the factors that exacerbated the volatility of U.S. stocks in September. According to Russ Wermers, a finance professor at the University of Maryland who co-authored a study on SAD and mutual fund flows, SAD is also "associated with greater risk aversion in the population." Wermers said, "it's not the absolute number of people with SAD that affects the stock market at a given moment, but the change in that number. For those with SAD, and the risk aversion associated with it, the month with the biggest changes tends to be September, when the day is fading faster than any other month. This, in turn, led to large net outflows from mutual funds in September, the study found. Mark Kamstra, a professor of finance at York University said, this SAD effect was positive for the market in October. Kamstra explained that SAD-affected investors will have largely completed their portfolio adjustment by the end of September, at which point investors will return to be "risk and reward hungry." Looking ahead, although the market is still under pressure from the Fed to raise interest rates, the third-quarter corporate earnings season that kicks off in October will also bring boost opportunities for some sectors. $JPMorgan Chase(JPM)$ , $Citigroup(C)$ , $Wells Fargo(WFC)$ and$Morgan Stanley(MS)$ will kick off the third-quarter banking reporting season on Friday, Oct. 14, ET. While forecasts of a recession and market volatility in the third quarter rattled the financial world, earnings expectations for banks have remained relatively stable. Analysts and investors will also be closely watching the reserves that JPMorgan and other banks set aside in response to a downturn in the U.S. economy. Wall Street analysts haven't slashed their earnings forecasts for the groups, despite the problems the big banks face, from inflation and the U.S. recession to the health of Credit Suisse AG. JPMorgan Chase Chief Executive Amie Dimon hinted at some of the bank's strength in recent questionings with other bank chiefs after warning earlier this year that an economic storm was coming. What's more, there has another data supported by Data-driven Investment Research @GameofTrades_Β·at Twitter. Smart money/dumb money confidence spread has crossed above 0.5. Similar occurrences produced an average annualized return of 55.1% on the S&P 500 since 2000. Are we going to see a massive rally? Question for you. How will prepare for October? Do you believe there will be a positive monthly return?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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